Hungary

2012 Tax rates of Hungary

Corporate tax

Rate

The standard corporate tax rate of Hungary is 10 %. This tax rate applies up to HUF 500 million. Over that tax base the tax rate is 19 %.

Taxation of dividends

Dividends for hungarian companies are tax exempt. This does not apply, however, for dividends distributed by a CFC.

Capital gains

Capital gains are considered as accounting profits. Therefore, capital gains are taxed according to the corporate tax rates of 10 % (up to HUF 500 million) and 19 % (over HUF 500 million).

Losses

Losses can be carried forward indefinitely, but the losses may only be used to offset up to 50 % of the profit before tax of any specific year. Losses are not allowed to be carried backwards.

Withholding tax

Dividends paid to nonresident idividuals are taxed at 16% witholding tax unless a tax treaty states otherwise. Dividends paid to legal entitites which are nonresident are not taxed.

In general there is no taxation levied on interest paid to legal entities. The wothholding tax on interest paid to individuals is 16 %.

Royaltiespaid to legal entities are exewmpt from withholding tax. Royalties paid to individuals are taxed at 16 % unless a tax treaty states otherwise.

There are no technical service fees.

 

Individual tax

General

Individuals that are hungarian citizens, have permanent homes or a center of vital interest in Hungary are considered to be resident in Hungary (for tax purposes). Hungarian residents pay tax on world-wide income. Foreign resident individuals only pay taxes on income derived from business conducted in Hungary. EEA citizens are considered hungarian residents if they spend more than 183 days per calendar year in Hungary.

Taxable income

Taxable income for an individual is considered to conclude employment and trade or profession income. Social security tax paid by employers are also considered as taxable income to a certain degree.

Rates

The income tax rate is 16 %. Bank interest and dividend income are also taxed at 16 %.

Capital Gains

Capital gains are taxed at a standard rate of 16 %.

Deductions

Personal allowance for the taxpayer and his/her children is available. Deductions may be granted for capital gains on the disposal of real estate.

Real Estate

Plot and building taxes are subject to municipality laws and may vary depending on location. The transfer tax is up to 4 % on residential property, and between 2-4 % on business properties and plots.

Net Worth Tax

There exist no net worth tax in Hungary.

Inheritance Tax

Inheritance received by direct descendants are fully tax exempt.

For close family the tax rate on inheritance is 40 %, but the first HUF 20 million are tax exempt.

Social Security

Employed individuals contributes to the social security. Thier contribution is 18,5 % of their gross salary.

Employers pay a social security tax of 27 % of the employee´s gross wage. Also, a vocational training tax of 1,5 % is paid by the employer.

VAT

VAT applies to all sales of goods, services and imports. The VAT is 27 % from the beginning of 2012 onwards. There are reduced rates at 5 % and 18 % for specific items/sectors.

 

Other

Tax year. Calendar year. In certain cases an individual may elect a different financial year for tax purposes.

Tax treaties. Hungary currently has over 70 tax treaties.

Filing requirements. Filing and payment are to be done monthly, quarterly or anually depending on different circumstances such as the magnitude of the oustanding VAT.

Registration (for VAT purpose). No registration threshold exists.

 

Links

Tax authorities. National tax and Customs office

Consulate

Local Tax Resources

Chamber of commerce

(Online realtor/stock exchange)